Our Unconscious Economic Theories

Our Unconscious Economic Theories

Georgism: ideas that have fallen on stony ground

Why have the economic views commonly known as Georgism or geoism not become more popular? Perhaps, says author Ian Lambert, people in our civilization hold unconscious assumptions about economics that preclude, or make it difficult to understand, the Georgist viewpoint.

We are reprinting Lambert’s important presentation on this subject in weekly installments.

PART ONE

by Ian Lambert

Ask many ordinary people what their beliefs about economics are and you will often get the response: “Well, I really don’t have any”. Don’t you believe it! The truth is that we all have beliefs; it is impossible to proceed without them. C.S. Peirce defined a belief as “that upon which you are prepared to act”. Anyone who tries to make a rational decision has to base it on something; what he bases it on are his beliefs. The truth is not that we do not have economic beliefs, merely that for most people they are a chaotic collection of assumptions and prejudices, ill-organized and frequently incompatible. Even if we are not consciously aware of the basis of some of our decisions, there must be something in the subconscious on which they are based.

I see one of our important tasks as being to help people to articulate their economic beliefs for themselves. Until this is done, such beliefs are not truly open to analysis and criticism not for the individual subject whose beliefs they are.

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” — John Maynard Keynes The General Theory of Employment Interest and Money

It is my belief that the principal reason why Georgist proposals have failed to appeal in this century to the public at large (including academics and intellectuals) is because they run counter to very deeply held beliefs; these beliefs are so profoundly held that, even when people follow the logic of Georgist arguments, they still feel distinctly uneasy about them. Henry George, like Keynes, well understood the profound force of economic ideas. As he pointed out in “The Science of Political Economy”, the issues in political economy are not ones which the average person can face afresh, with no prejudices; on the contrary, all of us play our part in the economy and have had to devise, consciously or subconsciously, our own set of beliefs to enable us to do so. (This is why it is so much easier to inculcate Georgist concepts and ideas in the minds of children and students than in the minds of adults.)

“In proposing to my readers to go with me in an attempt to work out the main principles of political economy, I am not asking them to think of matters they have never thought of before, but merely to think of them in a careful and systematic way. For we all have some sort of political economy….. few men honestly confess an ignorance of political economy….. There are many who say that they know nothing of political economy – many indeed who do not know what the term means. Yet these very men hold at the same time and with the utmost confidence opinions upon matters that belong to political economy, such as the causes which affect wages and prices and profits, the effect of tariffs, the influence of labor-saving machinery, the function and proper substance of money, the reason of “hard times” or “good times” and so on.” – Henry George (SPE).

We must help people to debunk the morass of conflicting and unreasoned beliefs which form their current economic and political prejudices. Much of Henry George’s work was devoted to doing precisely this; “Protection or Free Trade” is the paradigm example, but much of “Progress and Poverty” and “The Science of Political Economy” is also devoted to this; and in this century, Henry Hazlitt’s “Economics in One Lesson” is an excellent example of the same process.

We should be under no illusions, however, that having completed such a task our objective will be anywhere near accomplished. We should not set forth to cast out one devil only to see a worse one enter in. This is the great danger of iconoclasm. We all need beliefs, even to cope with the most mundane choices in everyday life. We cannot empty the mind in this sense; it is like a siphon from which we can only eject existing beliefs by drawing in fresh ones. Indeed, it is surely our innate knowledge of this that makes us cling so forcefully to our existing beliefs rather than let ourselves be denuded of them. Setting out merely to explode myths, therefore, will not win us converts. Such a policy is only likely to result in Georgism being hijacked by unscrupulous political factions, opposed to what we are opposed to, but for very different reasons.

The great failure of Georgism this century has been the failure to put Georgist ideas (as opposed to Georgist measures) into currency, particularly in universities, colleges and other institutions whose business it is to generate and analyze ideas. Moreover, what modern economics lacks, more than anything else, is a fount of new ideas. Georgists cannot realistically expect to compete with institutions and bodies whose enterprise is based on the amassing and analysis of vast amounts of data. Nor should they want to. Our task must be to undermine conventional economics — not to show that its logical processes are flawed, but rather to show that its premisses are flawed.

In this paper, I propose to consider certain themes and ideas which lie at the very heart of Georgism and the curious psychological deafness to which it has become subject in this century.

1. Cultural Relativism

Perhaps the greatest obstacle to understanding Georgism is the tacit acceptance of cultural relativism, the idea that there are no absolute truths any more: everything is subjective and, in the moral realm, voluntaristic. The idea of cultural relativism features strongly in two books of the 1980s: “A History Of The Modern World” by Paul Johnson; and “The Closing Of The American Mind” by Allan Bloom. Both writers consider that relativism has been the dominant theme in intellectual (and not so intellectual) circles through the twentieth century, with disastrous results:-

“But for most people, to whom Newtonian Physics, with their straight lines and right angles, were perfectly comprehensible, relativity never became more than a vague source of unease….. At the beginning of the 1920s the belief began to circulate, for the first time at a popular level, that there were no longer any absolutes: of time and space, of good and evil, of knowledge, above all of value. Mistakenly but perhaps inevitably, relativity became confused with relativism.

…. No one was more distressed than Einstein by this public misapprehension….. He lived to see moral relativism, to him a disease, became a social pandemic, lust as he lived to see his fatal equation bring into existence nuclear warfare. There were times, he said at the end of his life, when he wished he had been a simple watchmaker.” – Paul Johnson (HMW).

“There is one thing a professor can be absolutely certain of: almost every student entering the university believes, or he says he believes, that truth is relative….. The relativity of truth is not a theoretical insight but a moral postulate, the condition of a free society, or so they see it….. That it is a moral issue for students is revealed by the character of their response when challenged – a combination of disbelief and indignation: “Are you an absolutist?”, the only alternative they know, uttered in the same tone as “Are you a monarchist?” or “Do you really believe in witches?”

….. The study of history and of culture teaches that all the world was mad in the past; men always thought they were right, and that led to wars, persecutions, slavery, xenophobia, racism and chauvinism. The point is not to correct the mistakes and really be right; rather it is not to think you are right at all.” – Allan Bloom (CAM).

That Henry George was opposed to cultural relativism there can be no doubt. Although his writings are rarely directed specifically at relativism, this is hardly surprising, since he was writing at the end of the nineteenth century, before the dawn of the great age of relativism. I suspect that if George were alive today he would devote much of his time and energy to attacks on relativism, because it is the very ethos of relativism that justifies the chaos of present day (academic) economics. Relativism sees the existence of widely differing ana contradictory “schools” of economic thought as a great fount of richness and cultural diversity. To George it was an unparalleled disaster, resembling the intellectual climate of the Dark Ages before modern science began:-

“Of all the sciences, political economy is that which to civilized men of toady is of most practical importance. For it is the science which treats of the nature of wealth and the laws of production and distribution….. In all other branches of knowledge properly called science the inquirer may find certain fundamentals recognized by all ana disputed by none who profess it, which he may safely take to embody the information and experience of his time. But, despite its long cultivation ana the multitude of his professors, he cannot yet find this in political economy. If he accepts the teaching of one writer or one school, it will be to find it denied by other writers and other schools. This is not merely true of the more complex and delicate questions, but of primary questions. Even on matters such as in other sciences have long since been settled, he who today looks for the guidance of general acceptance in political economy will find a chaos of discordant opinions. So far indeed are first principles from being agreed on, that it is still a matter of hot dispute whether protection or free trade is most conducive to prosperity – a question that in political economy ought to be capable of as certain an answer as in hydrodynamics the question whether a ship ought to be broader than she is long or longer than she is broad. …. This is not for want of what passes for systematic study. Not only are no subjects so widely and frequently discussed as those that come within the province of political economy, but every university and college has now its professor of the science, whose special business it is to teach it. But nowhere are inadequacy and confusion more apparent than in the writings of these men: nor is anything so likely to give the impression that there is not and cannot be a real science of political economy.” – Henry George (SPE).

Indeed, “The Science Of Political Economy” can be likened to the work of Descartes, as the supreme attempt to put science – in George’s case economic science – on a firm foundation once and for all; it is perhaps more a work of philosophy and methodology than of “economics” in the accepted modern sense:-

“…let us consider the nature and scope of political economy, that we may see its origin and meaning, what it includes and what it does not include. If in this I ask the reader to go with me deeper than writers on political economy usually do, let him not think me wandering from the subject. He who would build a towering structure of brick and stone, that in stress and strain will stand firm and plumb, digs for its foundation to solid rock ….

In nothing more than in philosophy is it wise that we should be “like a man which built an house, and digged deep, and laid the foundation on a rock.”” – Henry George (General Introduction, SPE).

2. Moral Populism, Utilitarianism and the Tyranny of the Majority

Cultural and moral relativism inevitably promotes moral populism – the idea that something which might otherwise be moral or immoral can be rendered immoral or moral (as the case may be) merely by a majority of people in the community taking that view. moral populism arises in a democratic society because of the need to justify acts of the legislator (and those who administer and enforce the law) which seek to resolve conflicts between the moral values or views of different members of the community. One person believes that those who blaspheme against recognized religions should be punished; another believes in freedom of speech. What is the legislator to do? In a society where moral relativism (and in particular, voluntarism) prevails he cannot reconcile the two positions, because both (ex hypothesi) are equally valid. It is at this stage that utilitarianism is prayed in aid, for it posits that the moral way to resolve such a conflict is to look to the greatest happiness of the greatest number and therefore, because all men are treated as equals and their moral views therefore as being of equal weight, that the legislator must act in accordance with majority opinion. (In fact, such a version of utilitarianism is a gross over simplification of Bentham’s original idea; he was well aware of, and did not approve of, “majoritarianism”.)

Moral populism is the principle used in a democratic society to justify coercion. (The writer may not blaspheme because a majority of the community do not wish it.) The effect of moral populism is to brand all refusals to comply with (if not all objections to) “popular” or “democratic” legislation as immoral; it literally demoralizes its opposition.

“The great democratic danger, according to Tocqueville, is enslavement to public opinion ….

…. Although every man in democracy thinks himself individually the equal of every other man, this makes it difficult to resist the collectivity of equal men. If all opinions are equal, then the majority of opinions, on the psychological analogy of politics, should hold sway …. This is the really dangerous form of the tyranny of the majority, not the kind that actively persecutes minorities but the kind that breaks the inner will to resist because there is no qualified source of nonconforming principles and no sense of superior right. The majority is all there is. What the majority decides is the only tribunal. It is not so much its power that intimidates but its semblance of justice.” Allan Bloom (CAM).

Perhaps you, like me, are tired of the tendency of the media to demand or encourage the populace to have “views” on almost everything of topical importance. On television programs like “Question Time” in Britain, the presenter, after hearing from the panel, canvasses views from the audience – all of which are presupposed to be equally valid – and invariably ends up by taking a poll (by show of hands) of the members of the audience. Occasionally, the presenter will admit that the show of hands “proves nothing but it is interesting”, but the fact is that such polls are subtly designed to intimidate those holding the minority view. I actually find it very refreshing on occasion to hear some famous celebrity say that his views on something are unimportant – but it doesn’t help the television ratings!

Moral populism was not something which George specifically crusaded against, but he was perhaps more aware than most of the demoralizing effect which “popular” government could have on the community:-

“To turn a republican government into a despotism the basest and most brutal, it is not necessary formally to change its constitution or abandon popular elections ….

…. forms are nothing when substance has gone, and the forms of popular government are those from which the substance of freedom may most easily go. Extremes meet, and a government of universal suffrage and theoretical equality may, under conditions which impel the change, most readily become a despotism. For there despotism advances in the name and with the might of the people. The single source of power once secured, everything is secured. There is no unfranchised class to whom appeal may be made, no privileged orders who in defending their own rights may defend those of all ….

And when the disparity of condition increases, so does universal suffrage make it easy to seize the source of power, for the greater is the proportion of power in the hands of those who feel no direct interest in the conduct of government; who, tortured by want and embittered by poverty, are ready to sell their votes to the highest bidder or follow the lead of the most blatant demagogue; or who, made bitter by hardships, may even look upon profligate and tyrannous government with the satisfaction we may imagine the proletarians and slaves of Rome to have felt, as they saw a Caligula or Nero raging among the rich patricians ….

Where there is anything like an equal distribution of wealth – that is to say, where there is general patriotism, virtue, and intelligence – the more democratic the government the better it will be; but where there is gross inequality in the distribution of wealth, the more democratic the government the worse it will be; for, while rotten democracy may not in itself be worse than rotten autocracy, its effects upon national character will be worse ….

…. but in a corrupt democracy the tendency is always to give power to the worst. Honesty and patriotism are weighted, and unscrupulousness commands success. The best gravitate to the bottom, the worst float to the top, and the vile will only be ousted by the viler. While as national character must gradually assimilate to the qualities that win power, and consequently respect, that demoralization of opinion goes on which in the long panorama of history we may see over and over again transmuting races of free men into races of slaves.” – Henry George (P & P).

We (in Britain and America) may think we have escaped the demoralizing effect of moral populism but one has only to think of the rise of Nazi Germany, some thirty years after George’s death, and the concomitant corruption of the German mind to see how chillingly prophetic George’s words were. The Nuremburg trials attest to the fact that deep down we all know that moral populism is bogus.

Ian Lambert is a globetrotting man of many talents. This presentation was originally made at the 10th Annual Conference Of The Council Of Georgist Organizations, Santa Fe, New Mexico, July, 1990.

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One Response to Our Unconscious Economic Theories

“It is my belief that the principal reason why Georgist proposals have failed to appeal in this century to the public at large (including academics and intellectuals) is because they run counter to very deeply held beliefs; these beliefs are so profoundly held that, even when people follow the logic of Georgist arguments, they still feel distinctly uneasy about them. Henry George, like Keynes, well understood the profound force of economic ideas. As he pointed out in “The Science of Political Economy”, the issues in political economy are not ones which the average person can face afresh, with no prejudices; on the contrary, all of us play our part in the economy and have had to devise, consciously or subconsciously, our own set of beliefs to enable us to do so. (This is why it is so much easier to inculcate Georgist concepts and ideas in the minds of children and students than in the minds of adults.)”

It is my considered opinion that all human behavior, both economic and political, individual and social, is rooted in our fundamental (ist) assumptions about life whch do constitute what is commonly called religion.

Organized or disorganized as we may be in the religious realm, it is our unquestioned fundamental assumptions we hold, as self evident truths, that are the building blocks of society and all of our churches and states.

It will take nothing less than a religious conversion to implement Henry George’s proposals for a more just society. It is precisly for this reason that his books and ideas are systematicly kept out of the text books of our schools and away from the vunerable minds of our youth.

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Arts & Letters

Geonomics is …

a way to redirect all the money we spend on the nature we use – trillions of dollars annually. We can’t pay the Creator of sites and resources and are mistaken to pay their owners this biggest stream in our economy. Instead, as owners we should pay our neighbors for respecting our claims to land. Owners could pay in land dues to the public treasury, a la Sydney Australia’s land tax, and residents could get back a “rent” dividend, a la Alaska’s oil dividend. We’d pay for owning sites, resources, EM spectrum, or emitting pollutants into the ecosphere, then get a fair share of the recovered revenue. The economy would finally have a thermostat, the dividend. When it’s small, people would work more; when it’s big, they’d work less. Sharing Earth’s worth, we could jettison counterproductive taxes and addictive subsidies. Prices would become precise; things like sprawl, sprayed food, gasoline engines, coal-burning plants would no longer seem cheap; things like compact towns, organic foods, fuel cells, and solar powers would become affordable. Getting shares, people could spend their expanded leisure socializing, making art, enjoying nature, or just chilling. Economies let us produce wealth efficiently; geonomics lets us share it fairly.

as unfamiliar as geo-economics. The latter is a course some universities offer that combines geography and economics. A UN newsletter, Go Between (57, Apr/May ’96; thanks, Pat Aller), cited an Asian conference on geopolitics and “geoeconomics”. The abbreviated term ‘geonomics” is the name of an institute on Middlebury College campus and of a show on CNBC. Both entities use the neologism to mean “global economics”, in particular world trade. We use geonomics entirely differently, to refer to the money people spend on the nature they use, how letting this flow collect in a few pockets creates class and poverty and assaults upon the environment, and how, on the other hand, sharing this rental flow creates equality, prosperity, and a people/planet harmony. This flow of natural rent, several trillions dollars in the US each year, shapes society and belongs to society.

the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.

a new policy from a new perspective. Once your worldview shifts — so that vacant city lots are no longer invisible — then epiphany. “Of course! Why didn’t I see it before?” Once you do see the emptiness and what damage it does, how can you ever go back to the old paradigm?

a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.

more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.

in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.

a new field of study offered in place of economics, as astronomy replaced astrology and chemistry replaced alchemy. Conventional economics, in which GNP can do well while people suffer, is a bit too superstitious for my renaissance upbringing. If I’m to propitiate unseen forces, it won’t be inflation or “the market”; let it be theEgyptian cat goddess. At least then we’d have fewer rats. Meanwhile, believing in reason leads to a new policy, also christened geonomics. That’s the proposal to share (a kind of management, the “nomics” part) the worth of Mother Earth (the “geo” part). If our economies are to work right, people need to see prices that tell the truth. Now taxes and subsidies distort prices, tricking people into squandering the planet. Using land dues and rent dividends instead lets prices be precise, guiding people to get more from less and thereby shrink their workweek. More free time ought to make us happy enough to evolve beyond economics, except when nostalgic for superstition.

a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.

what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, including the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.